Editor’s note: “Quantum Computing: the Key to Unlocking AI’s Full Potential?” was previously published in July 2024 with the title, “How Quantum Computing Is Already Changing the World.” It has since been updated to include the most relevant information available.
When it comes to long-term investing, there are many ways to find success. For example, the great Warren Buffett likes to buy good businesses with wide competitive moats. Famed investor Benjamin Graham believed in backing undervalued stocks. Other folks like to invest in stable dividend-payers.
Personally, I work to uncover the next big thing emerging from the tech industry.
By zooming out to take in the bigger picture, I can identify the technological megatrends that are sure to reshape the world over the next decade. From there, I can home in on the stocks on the cutting edge of those megatrends.
Specifically, I like to do this during times of heightened market volatility – because that is often when you’ll find the best deals on promising stocks.
I did this in 2015, when many were panicking about plunging oil prices and a global economic slowdown. That same year, I recommended investors buy the dip in an up-and-coming chipmaker called Advanced Micro Devices (AMD). A few years later, AMD stock had soared more than 8,000%.
I was also able to do this in 2018, when the market was crashing due to the Fed’s aggressive rate hikes. In the midst of that crash, I recommended investors buy the dip in tech stocks like The Trade Desk (TTD), Roku (ROKU), and Tesla (TSLA). All three went on to soar around 1,000% over the next two years.
March 2020 offered a similar opportunity. While the market was roiling from COVID-19 shutting down the global economy, I was pounding the table on stocks like ZScaler (ZS) and Snap (SNAP). The two popped more than 500% over the next year.
In other words, looking past market volatility to discover the next batch of big tech winners is sort of “my thing.”
And as it happens, I think I may have just found that next batch of winners: quantum computing stocks.
What Is Quantum Computing?
Let me start my discussion of quantum computing by saying that the underlying physics of this technological breakthrough – quantum mechanics – is a highly complex topic. It would likely require over 500 pages to fully understand.
But, alas, here’s my best job at making a Cliff’s Notes version in 500 words instead.
For centuries, scientists have developed, tested, and validated the laws of the physical world, known as classical mechanics. These scientifically explain how and why things work, where they come from, so on and so forth.
But in 1897, J.J. Thomson discovered the electron. And he unveiled a new, subatomic world of super-small things that didn’t obey the laws of classical mechanics… at all. Instead, they obeyed their own set of rules, which have since become known as quantum mechanics.
The rules of quantum mechanics differ from that of classical mechanics in two very weird, almost-magical ways.
First, in classical mechanics, objects are in one place at one time. You are either at the store or at home, not both.
But in quantum mechanics, subatomic particles can theoretically exist in multiple places at once before they’re observed. A single subatomic particle can exist in point A and point B at the same time until we observe it. And at that point, it only exists at either point A or point B.
So, the true “location” of a subatomic particle is some combination of all its possible positions.
This is called quantum superposition.
Entanglement
Second, in classical mechanics, objects can only “work” with things that are also “real.” Of course, you can’t use an imaginary friend to help move the couch. You need a real friend instead.
But remember how the true location of a subatomic particle is the combination of all of its probabilistic states? Well, all those states are not independent; they’re entangled. So, if we know something about the probabilistic positioning of one subatomic particle, then we know something about the probabilistic positioning of another. It’s all connected. And that means that theoretically, all of these probabilistic states can work together, all at once, to create a super-complex ecosystem.
This is called quantum entanglement.
Between entanglement and superpositioning, subatomic particles can theoretically have multiple probabilistic states at once. And all those states can work together – again, all at once – to accomplish some task.
Pretty wild, right?
It goes against everything classical mechanics taught us about the world. It goes against common sense. But it’s true. It’s real. And now, for the first time ever, we are learning how to harness this unique phenomenon to change everything about everything…
This is why the U.S. government is pushing forward on developing a National Quantum Internet in southwest Chicago. It understands that this tech could be more revolutionary than the discovery of fire or the invention of the wheel.
Mark my words. Quantum mechanics could very well reshape our world over the next few years.
And some investors may end up making a lot of money because of it.
Quantum Computing Will Change the World
The study of quantum theory has made huge advancements over the past century, especially so over the past decade.
Scientists at leading laboratories and tech companies have started figuring out how to harness the almost-magical powers of quantum mechanics to make a new generation of super quantum computers. These devices are infinitely faster and more powerful than even today’s fastest supercomputers.
In the words of Haim Israel, Bank of America’s head of Thematic Research:
“By the end of this decade, the amount of calculations that we can make [on a quantum computer] will be more than the atoms in the visible universe.”
Again, the physics behind quantum computers is highly complex. But here’s my shortened version…
Today’s computers are built on top of the laws of classical mechanics. That is, they store information on what are called bits, which can store data binarily as either “1” or “0.”
But what if you could turn those classical bits into quantum bits – qubits – to leverage superpositioning to be both “1” and “0” stores at once?
Further, what if you could leverage entanglement and have all multi-state qubits work together to solve computationally taxing problems?
Theoretically, you’d create a machine with so much computational power that it would make today’s most advanced supercomputers seem ancient.
That’s exactly what’s happening today.
The Possibilities Behind Quantum Computing
Google has built a quantum computer that is about 158 million times faster than the world’s fastest supercomputer.
That’s not hyperbole. That’s a real number.
Imagine the possibilities if we could broadly create a new set of quantum computers 158 million times faster than even today’s fastest computers…
We may finally have the level of AI that you see in movies. Arguably the biggest limitation to today’s AI is the robustness of machine learning algorithms, which are constrained by supercomputing capacity. Expand that capacity, and you’d get infinitely improved machine learning algos – and infinitely smarter AI.
We may be able to eradicate disease. Of course, we already have tools like gene editing. But, as with AI, gene editing tech’s effectiveness relies on the robustness of the underlying computing capacity to identify, target, insert, cut, or repair genes. With quantum computing capacity, all that could happen without error in seconds.
What about a million-mile EV? We can only improve batteries if we can test them. And we can only test in the real world so much. Therefore, one way to unlock a million-mile battery is through simulation. And the higher the underlying computing capacity, the faster and more effective the simulations.
There’s seemingly no limit to what such powerful computing capacity could lead us to…
Which means the economic opportunities here are truly enormous.
The Final Word
Quantum computing is the most underrated and most transformational technological breakthrough since the internet.
In fact, it may be bigger than the internet. And Wall Street is starting to notice.
Quantum computing startup Rigetti (RGTI) is up about 30% this year. Its competitor, D-Wave Quantum (QBTS), has popped about 60%. And IonQ (IONQ) – the technical leader in quantum computing – has seen its stock more than double so far in 2024.
Quantum computing is starting to come into its own.
By dramatically increasing computing capacity and speed, this should help greatly accelerate the AI Boom.
And it should really help AI startups like Elon Musk’s xAI.
In fact, given all the positive developments surrounding AI, Elon Musk, and quantum computing, we are particularly excited about xAI’s growth prospects in 2025.
And we’ve discovered a promising “backdoor” way to invest in it.
Learn all about this little-known play on Musk’s next winner.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
P.S. You can stay up to speed with Luke’s latest market analysis by reading our Daily Notes! Check out the latest issue on your Innovation Investor or Early Stage Investor subscriber site.
